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Monetary equilibrium and price stickiness: A rejoinder

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  • Philipp Bagus
  • David Howden

Abstract

Luther and Salter argue for a regime where aggregate demand is restored by an increase in the money supply in response to an increase in the demand for money. They claim that, 1) monetary equilibrium policy prescriptions do not necessarily rely on sticky prices, 2) Cantillon effects can be neglected without consequence, 3) wealth redistributions from monetary policy are unimportant, 4) monetary disequilibrium theorists strive for a stable price level, 5) fewer price adjustments are necessary in their proposed regime than in ours, 6) savings and saving are equivalent, 7) changes in the composition of savings do not alter time preference, and, 8) in their proposed regime economic calculation is easier than in a 100 % reserve system. All these claims are false. They furthermore misconstrue us as preferring negative quantity adjustments to positive price adjustments. This too is false. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Philipp Bagus & David Howden, 2012. "Monetary equilibrium and price stickiness: A rejoinder," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(3), pages 271-277, September.
    • Handle: RePEc:kap:revaec:v:25:y:2012:i:3:p:271-277
    DOI: 10.1007/s11138-012-0183-7
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    References listed on IDEAS

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    1. David Howden, 2010. "Knowledge shifts and the business cycle: When boom turns to bust," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(2), pages 165-182, June.
    2. Bagus, Philipp & Howden, David, 2011. "Unanswered Quibbles with Fractional Reserve Free Banking," MPRA Paper 79594, University Library of Munich, Germany.
    3. Philipp Bagus & David Howden, 2011. "Monetary equilibrium and price stickiness: Causes, consequences and remedies," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 24(4), pages 383-402, December.
    4. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
    5. Philipp Bagus & David Howden, 2012. "Still unanswered quibbles with fractional reserve free banking," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 25(2), pages 159-171, June.
    6. Bagus, Philipp & Howden, David, 2010. "The Term Structure of Savings, the Yield Curve, and Maturity Mismatching," MPRA Paper 79592, University Library of Munich, Germany.
    7. Bagus, Philipp & Howden, David, 2010. "Fractional Reserve Banking: Some Quibbles," MPRA Paper 79590, University Library of Munich, Germany.
    8. Leland B. Yeager, 1994. "Tautologies in Economics and the Natural Sciences," Eastern Economic Journal, Eastern Economic Association, vol. 20(2), pages 157-169, Spring.
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    Cited by:

    1. Jesús Huerta de Soto & Antonio Sánchez-Bayón & Philipp Bagus, 2021. "Principles of Monetary & Financial Sustainability and Wellbeing in a Post-COVID-19 World: The Crisis and Its Management," Sustainability, MDPI, vol. 13(9), pages 1-11, April.
    2. William J. Luther & J. P. McElyea, 2018. "Austrian Macroeconomics in Search of Its Uniqueness," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 33(Summer 20), pages 1-20.
    3. Campos Dias de Sousa, Ricardo Emanuel & Howden, David, 2015. "The Efficient Market Conjecture," MPRA Paper 79792, University Library of Munich, Germany.
    4. Bagus, Philipp & Gabriel, Amadeus & Howden, David, 2014. "Causes and Consequences of Inflation," MPRA Paper 79608, University Library of Munich, Germany.
    5. García Iborra, Rafael & Howden, David, 2016. "Uses and Misuses of Arbitrage in Financial Theory, and a Suggested Alternative," MPRA Paper 79802, University Library of Munich, Germany.
    6. Joshua R. Hendrickson, 2015. "Monetary equilibrium," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 28(1), pages 53-73, March.
    7. Vaclav Rybacek, 2015. "Price Rigidities And The Market Process," Review of Social and Economic Issues, Romanian-American University, vol. 1(2), pages 74-83, march.
    8. Howden, David, 2013. "The Quantity Theory of Money," MPRA Paper 79601, University Library of Munich, Germany.
    9. Philipp Bagus & Amadeus Gabriel & David Howden, 2018. "On the Necessary and Sufficient Conditions for Legitimate Banking Contracts," Journal of Business Ethics, Springer, vol. 147(3), pages 669-678, February.

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    More about this item

    Keywords

    Sticky prices; Non-neutral money; Monetary equilibrium; Free banking; E52; E58;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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